For Private Equity, cloud offers the ability to make changes to your portfolio companies fast. It’s quick to deploy and easy to scale up and down, making organisations more agile. That’s the secret sauce - not being restricted by a physical footprint that the organisation owns itself.
The skill sets and the toolsets available via the cloud are very powerful. Without a doubt, they provide an immediate benefit. But you need to make sure you've got the right solution for the problem. Have you got the applications that can exploit some of those technologies? Or do you need to modify them in some way to be able to be spun up and spun down in a particular way?
What is cloud anyway?
Cloud is a very general term. There are many different ways to adopt cloud, from infrastructure as a service to software as a service and everything in between. The best way I’ve seen to describe it is using the analogy of pizza as a service.
You have everything from traditional on-premises, which, in pizza terms, would be buying the flour and all other ingredients as well as cooking it yourself in your own oven, to software as a service which is where you go to a party where they serve pizza and you just need to bring your conversation. Both processes give the same result - you get pizza - but there is a sliding scale of who’s involved and who’s responsible for each different task as you go up and down the stack.
Should all businesses migrate to the cloud?
Cloud isn't a silver bullet. It is not a panacea that fixes everything. There are many instances where it’s not going to be the answer. There are things within cloud that, if you get them wrong, they will be spectacularly wrong. If you configure things in the wrong way - or even in a way that worked for your on-premise solution - you may risk security or operational exposures. So, it's not a case of throwing everything into the cloud; it's about making good use of the capabilities that cloud brings.
There are people who will immediately want to say everything needs to run cloud native with a kind of religious fervour around it. And that's fine, in a world of unlimited money and time! However, the reality is that organisations need a migration plan or a roadmap to get to the cloud and may need to choose iterative steps. Therefore you may need to prioritise what things you want to address first.
The prioritisation will be driven by a number of factors. It will be driven by the strategic choices of the organisation, it will be driven by the importance of different applications, but it will also be driven by money. For example, if an organisation has just invested in an expensive on-premises hardware platform, back-to-back cost elements say that the equipment will need to depreciate over its lifecycle. It would be a very brave person, a very brave CIO, who would turn around to the finance team to say “We've made a strategic decision to move everything to the cloud next year, and that means writing off that million-pound platform.”
When is cloud not a good idea?
Regulatory constraints can impact a businesses ability to move to the cloud. In financial services, for example, there was a significant regulatory constraint at the outset of the cloud journey. By and large this has been addressed, certainly in the UK, but depending on the service and, crucially, the data being manipulated, there may be elements around data sovereignty which are still fairly restrictive.
That's where the proprietary platforms aspect of a cloud migration is important to consider. There may be hard stops which specify the type of hardware a particular application runs on, or the software, the clustering, the networking, etc. If they are proprietary and not supported by a cloud vendor then you need to make some hard choices. Do you stick with what you've got? Do you go for more of a data centre as a service cloud offering? That way you retain ownership of the hardware but you take a data centre offering from someone and call that cloud. It really depends on how far up the cloud ecosystem you want to move. If you want to move completely cloud native there will be more constraints from your existing environment that you will need to overcome.
The wider impact of cloud
One of the key aspects, from a private equity point of view, is the shift in financial model that comes with the cloud. The difference between the traditional capex, with depreciation, to an opex, more of a pay-as-you-go, model is something which organisations can struggle with. Organisations need to be prepared for that type of change and work closely with their finance teams to build a view - typically over a number of years - of what the shape of that spend is likely to be.
When considering a cloud migration, there’s obviously a financial overhead of the migration activity itself but there's also time involved in doing a migration. One business I worked with was talking about an aggressive two-year timescale for completing the cloud migration. In reality, most people assumed it would probably be five years, or more. This wasn't the largest company in the world, but it had a mixed collection of applications and technologies, and not all of them had an obvious or direct path to a cloud solution.
From the outset, there was an identified need to rework and redesign some of those applications. That in itself has a significant impact, not just in the technology team but also in the wider business. New applications might mean new business processes, new ways of working. That’s why it’s common that cloud migration projects rapidly move from a technology project to a complete business transformation exercise.